Households and taxpayers spared cost of big dig

The lawns and footpaths in front of thousands of Australian households and businesses have escaped the spinning blades of concrete saws and ditch diggers.

That’s the real deal on the street following the agreement to use thousands of kilometres of Telstra’s existing ducts and tunnels to lay its new fibre optic cable to millions of homes.

Ducts run under most suburban streets and represent the equivalent of the veins and arteries that will bring the national broadband network to life.

But under arrangements dating back to the PMG , these underground assets have been owned outright by Telstra since the day they were dug.

A spokeswoman for the Minister for Broadband, Senator
Stephen Conroy,
said yesterday Telstra would retain ownership of the ducts, but would lease access to them to NBN Co. for 30 years. But the company will have to maintain the ducts as part of its deal with the government.

By keeping ownership of its subterranean labyrinth, Telstra has also managed to strike a real price for an asset that was until now difficult for the market to value.

Analysts claim that the deal struck between the government and Telstra will spare taxpayers huge costs that would otherwise have been incurred had NBN Co. been forced to dig its own trenches to get access to the so-called “last mile" to homes and business.

“It’s a heck of a lot cheaper, we’re talking about an impact here of billions," said telco analyst at research house Ovum, David Kennedy.

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The alternative would have been to run overhead cables, a situation that saw many councils lock horns with Telstra and Optus over the roll out of pay television in the 1990s.

Broker analysts agreed and said the government would always have had to work with Telstra if it wanted to replace copper links into home.

Mr McDonnell said there was now potential revenue upside for Telstra if it struck a deal to help provide services needed to lay the NBN.

“If you are going to use Telstra’s ducts and they are going to take away the copper, then two of the three critical parts here are already being provided by Telstra," Mr McDonnell said. “I think they are in the box seat to provide a complete solution which is inherent in using their facilities and it’s not included in the $11 billion.

Such a situation could be mutually beneficial for all parties. Both analysts noted that Telstra already has a big skilled workforce on its books, many of which could have their jobs transferred across to the NBN.

A distinct possibility is that the deal with Telstra to lay, maintain and effectively operate government-owned fibre could head off potential industrial friction that would come with the transfer of thousands of jobs.

If Telstra fails to snare key NBN infrastructure services deals, hard decisions will have to be made.

“If they don’t win that work they are going to be a very, very different company in five years’ time," Mr Kennedy said. “Their whole business strategy changes pretty dramatically. The old engineering Telstra withers away and you wind up with a more marketing and media oriented Telstra."

However, a key change the NBN will have to juggle in junking copper and taking over the Universal Service Obligation is literally the loss of power.

Because optical networks use light through glass cables rather than electrical current over copper to deliver voice and data, alternative sources of power will need to be found to ensure phones can run emergency calls during a blackout.

NBN Co. chief
Mike Quigley
said in September 2009 that the architecture of the new network indicated connection boxes on the sides of homes would require batteries to provide back-up power. Mr Quigley noted that NBN Co. was looking at how to lessen the environmental impact of this, particularly over the disposal of what over years could be millions of government-owned batteries.

But that doesn’t mean that Telstra’s old wires are worthless.

“There would be tons of copper, Mr McDonnell said. “It’s a residual source of value. It could be smelted down."